Earnings Troubles May Signal Larger Issues for Shandong Dawn PolymerLtd (SZSE:002838) Shareholders

Shandong Dawn Polymer Co.,Ltd.'s (SZSE:002838) recent weak earnings report didn't cause a big stock movement. Our analysis suggests that along with soft profit numbers, investors should be aware of some other underlying weaknesses in the numbers.

Check out our latest analysis for Shandong Dawn PolymerLtd

How Do Unusual Items Influence Profit?

For anyone who wants to understand Shandong Dawn PolymerLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥25m worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Shandong Dawn PolymerLtd.

Our Take On Shandong Dawn PolymerLtd's Profit Performance

Arguably, Shandong Dawn PolymerLtd's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Shandong Dawn PolymerLtd's statutory profits are better than its underlying earnings power. In further bad news, its earnings per share decreased in the last year. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. If you want to do dive deeper into Shandong Dawn PolymerLtd, you'd also look into what risks it is currently facing. For example - Shandong Dawn PolymerLtd has 1 warning sign we think you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Shandong Dawn PolymerLtd's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. Some people consider a high return on equity to be a good sign of a quality business. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying to be useful.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.